Have you ever heard of the investor, Warren Buffet, who has a net worth of over $81 billion?
Buffet started his company with $100 of his own money and roughly $105,000. Investing is something that you can do to grow your wealth as you get older. It also acts as an additional income stream if you need cash ahead of retirement.
It’s amazing what you can do with investments, like ETFs, stocks, and so on. Here are some of the main benefits of investing your money.
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Invest and Save More From Tax
Did you know that depending on taxable income and filing status, the tax rate on long-term gains is 0%, 15%, or 20%? This means that investing your money can help you save from paying taxes.
Let’s say you purchased 100 shares of Z stock for $5,000 for $50 per share and sold it 14 months later for $80 per share. It falls into the 15% capital gains bracket. Instead of paying $720 tax for a holding period in a year or less, you will only pay $450.
In this case, you can save $270 from taxes. These can become an extra income for you which you can use to reinvest or keep as savings. You can also save more from tax by deducting the loss against any gains from other investments.
For instance, you purchased 100 shares of Y stock at $60, and you were only able to sell it at $40 per share, having a $2,000 loss. Yet, you were able to sell 100 shares of Z stock that you bought for $30 per share for $100, thus gaining $7,000. Subtracting the loss to the profit, you will only owe tax on the $5000 net gain.
As discussed above, you can get an even lower tax when you hold the Z stock shares for longer than a year.
Invest and Grow Your Money
One of the main benefits of investing in stocks is that you get a chance to grow your money and profit. Investment vehicles, such as stocks or bonds, offer the return of your money long-term. This means that your money will grow, creating wealth over time.
For instance, you are to invest $10,000 investment at age 20. Base on a 5% interest rate, there is a high chance that by the time you’re 60, it would grow to over $70,000. When made at age 30, that same investment would be $43,000 by age 60, and made at age 40 would only be $26,000.
The longer you let the money rest, the more wealth it can generate. You can leverage growth in different sectors of the economy when investing in stocks. This will result to profit even if some of the stocks are at a loss.
Some stock companies offer income in the form of dividends. If you can invest in such a company, this means that you will receive an annual payment.
What’s great about this is that even if the stock has lost value, you will still receive payment. Dividend income can help save for your early retirement or other financial goals.
Invest and Retire Early
Investing is not limited to buying and selling stocks. You also use that money to build future gains.
Let us take investing in real estate as an example. Try investing your money into building an apartment today. You can reap the benefit as a landlord who collects monthly rent when you retire.
Unlike shoes that lose value as more people buy them, real estate values increase as time passes by. Let’s assume that you invested your money in real estate in Idaho during 2011. Given that Idaho grew at 149% since 2011, this would mean that your money would have also grown by 149%.
Your profit can be doubled depending on the average rate of return of the type of property. Residential properties have an average return of 10.6%. While commercial real estate has an average return on investment of 9.5%.
Stay Ahead of Inflation
When you invest your money now, you will get the upper hand by having more purchasing power. This means that you can buy more stocks with $1000 today than when there will be a 3% or 5% inflation. By the time there is inflation, you’d have bought more shares that you can resell for a higher price.
Sectors to Invest On
With the array of benefits that you can reap, you might be considering investing your money right now. Various sectors always change when it comes to investment. You have to watch which sector is more likely to grow in the future.
Here are a few of the best sectors to consider investing your money in.
The real estate market has a steady increase in value, and as we’ve mentioned above, it reached a new height in 2020. Thus, if you’re looking to start investing your money, then real estate is your go-to choice. Not only do real estate prices increase over time, but you can also use them to generate rental income.
If you’re worried about inflation, be aware that a property’s value rises with inflation. This means that the amount tenants pay in rent increase over time. These increases will mean income for you which you can save or reinvest in stock commodities.
Did you know that Tesla revealed that they bought bitcoin amounting to $1.5 billion? This caused the price of the cryptocurrency to gain a market value of over $800 billion. What’s more, is that the number of users increased throughout 2020.
This means that there is a growing trend of investing in cryptocurrencies. Why not make an investment in the technology sector with the benefits provided. You can also invest in other digital currencies like Ethereum and Litecoin.
Still not sure about cryptocurrency? Research, read more and learn the ins and outs to help you reach a decision. Be smart and talk to reliable people about where and what you should invest in.
Reap the Benefits of Investing Now
These are only some of the many benefits of investing your money. Are you considering investing your money? Look towards the future as you take advantage of the strong power of compounding.
Still, need more information on investing? Read through our other articles and learn how to start investing and reap the benefits!